• High inflation, projections have been raised
  • Energy prices, lower supply problems will lead to lower inflation
  • High inflation is a major concern for all
  • Projection for this year raised to 6.8% from 5.1%, for next year raised to 3.5% from 2.1%
  • QE is coming to an end, reinvestments will continue for a longer period, ECB will provide liquidity
  • ECB will decide to hike rates by 25 bps in July, hike in September will depend on inflation outlook
  • Further hikes will be moderate and stable

EURUSD at 15:10 drops from daily peaks, euro gains only 0.05% against the dollar, DAX loses over 1.2%

  • Economic activity will be depressed due to high energy prices
  • Fiscal policy provides a safety cushion against the impact of the war in Ukraine
  • Wage pressures have emerged in the Eurozone
  • Conditions for economic recovery remain good
  • ECB will be data dependent

It is fair to say that the ECB is as transparent as it can be. We have a clear path of hikes mapped out. In view of this, it is unlikely that further important words will come from Lagarde. Nevertheless, the Q&A begins

  • ECB is not acting in such a way as to catch up with the Fed
  • If forecasts don’t fall, September hike will be bigger 
  • ECB doesn’t want fragmentation in policy action, if there is fragmentation, new tools may be introduced (it’s about spreads widening too much) 
  • Meanwhile, spread between Italian and German yields rose to the highest level since May 2020

EURUSD reduces gains slightly, but stock market declines are maintained. DE30 reaches the target of the short-term Head and Shoulders Pattern formation. 

DE30 is testing 14200 points. Source: xStation5

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